Systemic Risk through Contagion in a Core-Periphery Structured Banking Network
Journal
Banach Center publications
ISSN
0137-6934
ISSN-Digital
1730-6299
Type
journal article
Date Issued
2015
Author(s)
Abstract
We contribute to the understanding of how systemic risk arises in a network of credit-interlinked agents. Motivated by empirical studies we formulate a network model which, despite its simplicity, depicts the nature of interbank markets better than a symmetric model. The components of a vector Ornstein-Uhlenbeck process living on the nodes of the network describe the financial robustnesses of the agents. For this system, we prove a LLN for growing network size leading to a propagation of chaos result. We state properties which arise from such a structure, and examine the effect of asymmetry on several risk management issues and the possibility of contagion.
Language
English
HSG Classification
None
HSG Profile Area
None
Refereed
No
Publisher place
Warszawa
Volume
104
Number
1
Start page
133
End page
149
Subject(s)
Division(s)
Eprints ID
251436